WASHINGTON—The Defense Credit Union Council and America's Credit Unions have joined a powerful coalition of banking and payments groups urging the Federal Reserve to formally withdraw its stalled debit-interchange proposal under Regulation II.
DCUC and ACU joined a broad coalition of leading financial services associations and organizations in submitting a joint letter to Ann E. Misback, Secretary of the Board of Governors of the Federal Reserve System. The coalition urged the Federal Reserve to withdraw its 2023 proposed amendments to Regulation II, citing ongoing legal uncertainty and outdated data used to support the proposal.
The letter, signed by American Bankers Association; America’s Credit Unions; Association of Military Banks of America; Bank Policy Institute; The Clearing House; Defense Credit Union Council; Electronic Payments Coalition; Independent Community Bankers of America; and National Bankers Association, stressed that recent, conflicting federal court decisions have created significant uncertainty around the current and future status of Regulation II. The associations highlighted that the 2023 proposal relies on 2021 data that no longer reflects the realities of today’s debit market, especially given recent changes in payment network rules, increased fraud trends, and rapid shifts in consumer payment behavior.
The coalition further warned that lowering the regulated debit interchange cap would harm consumers, particularly low-income and underserved households, by increasing the cost of basic banking services and undermining financial institutions’ ability to serve their communities. The letter also notes that federal research suggests merchants are unlikely to pass any savings on to consumers.
While the Federal Reserve has indicated it will not finalize the proposal until active litigation concludes, the letter urges the Board to formally withdraw the rule to provide clarity to consumers, financial institutions, and the broader payments ecosystem. The coalition also called on the Federal Reserve to publish its 2023 debit card survey data, which has yet to be released, to better inform any future regulatory efforts.
Letter To House
Separately, DCUC submitted a letter to House Small Business Committee Chairman Roger Williams and Ranking Member Nydia Velázquez ahead of the hearing, “From Service to Startup: Empowering Veteran Entrepreneurs.”
DCUC applauded the Committee’s leadership in highlighting the urgent need to expand access to capital for America’s military and veteran entrepreneurs.
DCUC urged the Committee to recognize the need to modernize the outdated Member Business Lending (MBL) cap, which limits federally chartered credit unions to business loans totaling no more than 12.25% of their assets. Unlike banks, credit unions face this statutory cap even when they are well-capitalized and ready to lend. As a result, many veteran entrepreneurs are turned away, not because of credit risk, but because of the arbitrary ceiling.
DCUC said it strongly supports the bipartisan Veterans Member Business Loan Act (VMBLA), introduced as H.R. 507 and S. 110, which would exempt loans to veteran-owned small businesses from the MBL cap. This common-sense reform would expand veteran access to affordable credit at no cost to taxpayers, enabling community-based credit unions to say “yes” more often to veteran borrowers.
“Veteran-owned businesses play a critical role in the U.S. economy, generating nearly $1 trillion in annual revenue and employing about 5 million Americans,” said Jason Stverak, DCUC chief advocacy officer. "Yet they face disproportionately high credit denial rates and persistent financing shortfalls. Removing the MBL cap for veteran business loans would help bridge this gap and spur new economic opportunities nationwide."
DCUC emphasized its long-standing commitment to improving financial access for veterans and reaffirmed that its member credit unions stand ready to responsibly increase lending as soon as Congress acts.
“Veteran entrepreneurs deserve full access to capital, and credit unions are uniquely positioned to provide it,” DCUC wrote. “We encourage the House Small Business Committee to advance the Veterans Member Business Loan Act as a meaningful step toward empowering those who have served our nation to build and grow successful businesses,” said Stverak.
ACU's Perspective
ACU emphasized the proposal relies on outdated data.
“America’s Credit Unions, alongside a range of financial service organizations, urges the Federal Reserve to withdraw its 2023 proposed amendments to Regulation II," said Scott Simpson, America's Credit Unions president/CEO. "The proposal relies on outdated 2021 data, would worsen existing flaws in the interchange framework, and risks driving up costs for low-income and underserved households. With conflicting federal court rulings and significant changes in the debit market, it is neither practical nor possible for the Fed to advance a final rule without updated data and legal clarity. We encourage the Fed to provide certainty to consumers, issuers, and retailers by formally withdrawing the proposal and reassessing the issue when more current information is available.”